Buy to Let

Buy-to-Let

The Basics

The main difference with a buy to let mortgage is that the lender can take into account the rent you will earn, as well as your income from your job. Some lenders allow you to add the rent to your salary whilst others base the loan entirely on rent.

Borrowing rules

How much you can borrow depends on the lender, but the maximum ranges from £150,000 to £1m per property, and the most lenders will lend is 85% of the property price. This means you need a deposit of at least 15%. Deals become more competitive if you can put down 20% or 25%.

A lender will also take into account how much money you earn on the property. The formula varies but as a rule the rental income should be between 130% to 150% of the mortgage payment. So if your monthly repayments are £500, the income you should be between £650 and £750. Some lenders will lend a multiple of your salary, say three times, plus half the rental income.

Tax Breaks

There is no direct tax relief on but-to-let mortgages, but you can offset interest payments on your mortgage against tax on rental income, along with other expenses such as agents’ fees and maintenance costs.

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